XM, Sirius asked to pay song royalties

Music industry group pushes for increasing percentage cut of satellite operators' revenue in upcoming royalty deal.

By David Ellis, CNNMoney.com staff writer

November 1 2006: 12:17 PM EST

NEW YORK (CNNMoney.com) -- Satellite radio operators XM Satellite Holdings and Sirius Satellite Radio may have to pony up more cash for the rights to play artists' songs on their various stations if a music industry group gets its way.

This year, a royalty agreement between the two satellite radio outfits and SoundExchange, a music industry organization that collects and distributes song royalties to artists and record labels, is set to expire, with each side pushing for a more favorable deal.

SoundExchange - which represents such record companies as Warner Music Group (down $0.08 to $25.85, Charts), Vivendi (down $0.40 to $33.37, Charts)'s Universal Music Group and Sony BMG, a joint venture of Sony (up $0.14 to $41.12, Charts) and Bertelsmann - is pushing for a increasing cut of both XM's and Sirius' revenues, starting at 10 percent next year and rising to 23 percent by 2012.

Under the current plan, XM (down $0.39 to $11.27, Charts) and Sirius (down $0.07 to $3.76, Charts) pay somewhere around 6.5 to 7 percent of their revenue to SoundExchange, according to the Washington Post, which reported the story earlier Wednesday.

XM and Sirius, which are usually battling for new subscribers by relying on such talent as Howard Stern and Bob Dylan, have partnered in the negotiations, offering the music industry group a nearly 1 percent cut of their revenue.

Chance Patterson, vice president of corporate affairs for XM, told CNNMoney.com the SoundExchange plan would be a major handicap for both companies.

SoundExchange, however, argues that it approved the current royalty rates to help both satellite operators get off the ground, but now wants a fair price for its songs. The organization is not looking to unfairly burden the two companies, explains Willem Dicke, a spokesman.

"There is a partnership in this," said Dicke. "Our payments are tied to their success."

SoundExchange said it collected $43 million in royalties last year and said it anticipates collecting roughly $55 million to $60 million this year.

The Copyright Royalty Board, an division of the Library of Congress, will make the final decision on the agreement.